Irish Financial Services Appeals Tribunal

Irish Financial Services Appeals Tribunal

Record number: 001/2007

In the matter of Part VIIA of the Central Bank Act 1942

Westraven Finance Ltd T/A Brinkspeed

Appellant

And

The Irish Financial Services Regulatory Authority

Respondent

Tribunal: Francis D Murphy

Geraldine Clarke

John Loughrey

Sitting in public in Frederick House, 19 South Frederick Street, Dublin 2 on the 24th and the 25th of July 2007

Decision Delivered: 31 August 2007

John Breslin BL instructed by Messrs McCann Fitzgerald, Solicitors for the Irish Financial Services Regulatory Authority

Wilson Sesan Olayinka for Westraven Finance Ltd.

DECISION:

On the 9th of May, 2005 Westraven Finance Ltd (Westraven) applied to the Irish Financial Services Regulatory Authority (the Financial Regulator) under Section 30 of the Central Bank Act 1997 (as inserted by Section 27 of the Central Bank and Financial Services Authority of Ireland Act 2004) for an authorisation to carry on a money transmission business. On the 29th of March 2007 the application was refused under Section 31 of the 1997 Act. By Notice in Writing dated the 26th of April, 2007 Westraven appealed the decision to the Irish Financial Services Appeals Tribunal (the Appeals Tribunal).

The Appeals Tribunal, having considered the arguments advanced and the evidence adduced, decided to affirm the decision of the Financial Regulator for the reasons set out hereunder.

THE APPEALS PROCESS:

On the 26th of April, 2007 Westraven lodged with the Registrar of the Appeals Tribunal (the Registrar) a notice of appeal in the prescribed form against the decision of the Financial Regulator. On the 1st of May, 2007 the Appeals Tribunal consisting of

Francis D Murphy, Inge Clissman and John Fish agreed, at the request of Mr Olayinka, to waive the entire of the appeal fee payable under Rule 5 of the Rules of the Irish Financial Services Appeals Tribunal Rules 2007 (The Rules).

On the 14th of May, 2007 the Registrar delivered a copy of the notice of appeal to the Financial Regulator and informed the Regulator that the time for delivery of a response prescribed by Rule 4 (5) of the Rules was extended to 28 days.

The response of the Financial Regulator was delivered to the Registrar on the 7th day of June, 2007 and a copy thereof was collected by Mr Olayinka on behalf of Westraven at the Appeals Tribunal offices on the 15th day of June, 2007.

On the 15th of June, 2007, the Chairperson of the Appeals Tribunal designated Geraldine Clarke and John Loughrey to constitute with him the Appeals Tribunal for the purposes of the Appeal.

The Appeals Tribunal ordered that a Directions Hearing be held at the offices of the Appeals Tribunal in Frederick House on Monday the 2nd of July 2007 at 10.30am and the parties were notified accordingly.

At the Directions Hearing, it was directed or agreed (among other things) as follows:

a)  That the Appeal would be heard on Tuesday the 24th of July, 2007 in Frederick House and on succeeding days if necessary.

b)  That the hearing of the Appeal would be conducted in public.

c)  That each party would provide to the Registrar for transmission to the other party a statement or proof of the evidence to be given by any witness intended to be called by him.

d)  That the correspondence and documentation furnished to the Registrar would be taken as proven without further evidence.

The delivery of the documentation by each party to the Registrar was completed on the 19th of July, 2007 and duly transmitted by the Registrar to the other party.

Evidence on behalf of Westraven was given by Mr Olayinka, Mr Ayo Akande and

Mr Bamidele Emmanuel.

Evidence was given on behalf of the Financial Regulator by Mr Conor Ryder,

Mr Neil Kennedy and Ms Sharon Donnery. Oral submissions were made by Mr Olayinka and Mr Breslin. The latter supplemented his oral submissions with detailed submissions in writing.

At the conclusion of the hearing, the Appeals Tribunal reserved its judgment.

THE BACKGROUND:

Westraven was incorporated in Ireland on the 12th of March 1999. The issued shared capital was €2 divided into two ordinary shares of €1 each, of which one is held by Mrs Olakumbi Olayinka and the other by Mr Wilson Sesan Olayinka, each of whom is a director. The registered office of the company was situated at 11, Cluain Aoibhinn, Trelleckstown Road, Naas, Co Kildare. The business of Westraven operated at all times from the Retail Centre, Naas Road, Newbridge, Co Kildare. It commenced the money transmission business in October 2001 and the first accounts of the company were made up to the 31st of December of that year.

Mr Olayinka was born in Ibadan, Nigeria, and had considerable experience in financial matters prior to the formation of Westraven. The greater part of the business of Westraven in the years after its incorporation related to the transmission of monies from Ireland to Nigeria.

The accounts of Westraven for the first three years show that there were a relatively small number of employees varying between three and six and a growing business which incurred a small loss every year. The evidence given to The Appeals Tribunal confirmed that money transmission businesses were frequently undertaken by small enterprises.

On the 15th of September, 2003 money transmission businesses were made subject to certain provisions of Section 32 of the Criminal Justice Act 1994 (the 1994 Act) which required persons engaged in those businesses to adopt measures to prevent and detect offences of money laundering. On the 1st of February, 2004 the remaining provisions of Section 32 of the 1994 Act became applicable to money transmission businesses. Those provisions required that reasonable measures should be taken to establish the identity of persons to whom the business provided services and an obligation to retain for five years the originals or copies of certain documents or materials. On the 8th of July, 2005 Section 32 was amended to extend the requirement to adopt prevention and detection measures to offences of financing terrorism.

The business of money transmission was not subject to regulation by the Financial Regulator before January 2005. Indeed, Mr Olayinka had inquired on the 11th of April, 2002 from the Central Bank whether the business then carried on by Westraven required an authorisation and was informed that it did not, as was then the case.

The Central Bank and Financial Services Authority of Ireland Act 2004 (the 2004 Act) provided (amongst other things) that as from the 1st of January, 2005 a person should not carry on a money transmission business (or other regulated business) unless the person was the holder of an authorisation issued by the Central Bank and Financial Services Authority of Ireland. The 2004 Act expressly provided a moratorium or period of grace for persons then carrying on a money transmission business by providing that the restriction should not apply to them until six months after the commencement of Section 27 of the Act of 2004 which, in the event, was the 1st of July 2005.

THE APPLICATION FOR AN AUTHORISATION:

On the 9th of May, 2005 Westraven applied to the Financial Regulator for an authorisation to operate a money transmission business. The letter of application enclosed eight documents, one of which was a questionnaire to be completed by each of the directors and executives. To the questionnaire was annexed a declaration which included the statements following:

“ a) I have furnished the information set out or referred to in this questionnaire at the request of the applicant whose name is set out on page 2 [Westraven] of this form and which is an applicant for (or has been granted) an authorisation under the Central Bank Act 1997 (as amended) and I am aware that the Authorisation and Supervision Requirements and Standards that the Financial Regulator must be satisfied that executive directors and senior executives are fit and proper persons and have appropriate competence and experience in enable them to fulfil their duties and that non executive directors are fit and proper persons and have suitable relevant experience.

b) ------

c) declare that : -

i)  I have truthfully and fully answered each question in this questionnaire, and have disclosed any other information which might reasonably be considered relevant to the purpose of furnishing this form set out in Paragraph (a) above and

ii)  I will promptly notify the Financial Regulator of any changes in the information which I have provided and will supply any other relevant information of which I may become aware at any time after the date of this Declaration”

That declaration was signed by Mr Wilson Sesan Olayinka, the other director and an executive of Westraven.

The documents enclosed with the application for an authorisation included an agreement between Travelex Money Transfer Ltd (Travelex) and Westraven dated the 12th day of November 2004. Under that agreement, Travelex appointed Westraven its representative on a non-exclusive basis in Ireland and the United Kingdom and entitled Westraven to offer certain money transfer services in accordance with the procedures specified therein.

The application for an authorisation and the accompanying documents were assessed and processed by the Financial Institutions and Funds Authorisation (FIFA) Department of the Financial Regulator. The officer of that Department primarily responsible for the investigation was Mr Conor Ryder who worked under and reported to Mr Michael Deasy, the head of FIFA.

The examination of the application of Westraven was only one of many undertaken by the Financial Regulator in 2005. The Appeals Tribunal was informed in the course of the hearing by it that about 40 persons applied for an authorisation to carry on a money transmission business when that requirement was introduced on the 1st of January 2005. Again, Mr Ryder explained to the Appeals Tribunal that discussions took place between the Financial Regulator and interested parties in relation to the process to be adopted. Application forms were in draft and available to the applicant in April 2005, and that draft was subsequently approved. At the same time, the “Guidance Notes” were provided to applicants.

As part of the assessment process, Mr Ryder wrote to various agencies including the Garda Central Vetting Unit and HM Revenue and Customs. In addition, he wrote on the 4th of July, 2005 to Mr Leon Isaac, marketing director of Travelex.

By letter dated the 10th of June, 2005 Mr Ryder wrote to Mr Olayinka seeking specific information in relation to the business and affairs of Westraven. In his reply dated the 13th of June, 2005 Mr Olayinka confirmed that there would be 100 agencies by June 2005 and 300 agencies by the first quarter of 2006. He said that the agency expansion was mainly for the rest of the world transactions via Travelex.

On the 8th of July, 2005 a Mr Ronald Donders of Travelex contacted Mr Ryder. He informed him that he was concerned about the possibility of Westraven obtaining an authorisation. Mr Donders made reference to an investigation of Westraven by the German financial regulator and claimed that Westraven owed Travelex €43,000. Mr Donders was also recorded by Mr Ryder as saying that Travelex had ceased their business relationship with Westraven.

On the 17th of August, 2005 Mr Donders wrote to Mr Ryder in the following terms:

“Re Your letter 4th July 2005 with reference cr mm

In reaction to your letter:

We know Mr Olayinka as director of the company “Westraven Finance Ltd t/a Brinkspeed”.

Westraven Finance Ltd was appointed agent to our Company at the beginning of 2004 and proved to be an unreliable and troublesome partner. He was consistently late with payments. In addition, we extended credit to Westraven Finance on the basis of an evidence of payment which was sent by fax by Mr Olayinka. It later transpired that that fax and other faxes evidencing payments had been falsified. We terminated our relationship with Mr Olayinka on 9th January. Westraven’s outstanding debt to us was €72,000. Up to the present day, Westraven still owes TMT about €42,000.

Furthermore, I believe that Mr Olayinka registered a branch of Westraven Finance Ltd with Companies House in Aachen, Germany, and that it operated as a money transmitter without a valid licence. I also believe that the police in Germany are currently investigating this matter. Please contact Siegmar Apitzsch KK (Germany police reference 608000-020767-05/0) Tel +49 -241-95773527. Address: Lehnstrasse 17, 52146 Wuerselen”.

It was later, on the 5th of April, 2006 when a Mr Robert Cowling of Travelex sent an email to Mr Ryder in the following terms:

“Following our conversation this morning, I have discussed the matter of Brinkspeed Ltd with Mr Isaacs and Mr Donders.

Brinkspeed was stopped from processing transactions via the Travelex system in January 2005, 15 months ago, due to non payment of funds due to Travelex. As I said on the phone, we have not terminated our contract with Brinkspeed, as Brinkspeed still owes Travelex the sum of approximately €35,000. We have been using the contract in order to convince Brinkspeed to pay the money owing. We have now a court judgment against Brinkspeed for the payment of the debt which has been endorsed by the Irish courts which is currently in the hands of the Sheriff. As a result of our conversation today, we have decided that we will terminate the contract with Brinkspeed.

Further, when speaking to Brinkspeed’s lawyer, Mr Isaacs did not refer to the situation as a “temporary blip” or anything of the sort. In fact, Mr Isaacs limited his comments to asserting that there was no possibility of a future relationship with Brinkspeed while the money owing remained outstanding.